Bulgaria unilaterally relieves double taxation by granting an ordinary credit for foreign tax. The credit is generally maxed out at the amount of tax that would have been due in Bulgaria on the relevant income. There is no provision for the carry-forward or back of unused credits. Unilateral relief in the form of a tax exemption is also granted to dividends received by Bulgarian tax resident companies from subsidiaries located in other EU/ EEA Member States. However, effective 1 January 2016, dividends distributed to a Bulgarian company by its subsidiaries located in EU or EEA are exempt from corporate income tax only if such distribution is not treated as a tax-deductible expense by the distributing company or in any way does not reduce the tax base of the subsidiary.
Further, Bulgaria’s tax treaties usually provide for relief from double taxation in the form of a credit or exemption.
Below is a summary of the available methods for various income tax streams based on domestic law.
The credit column shows the type of foreign tax credit granted when the receiving country receives a payment. Four abbreviations are used for the type of foreign tax credit available:
- NC means no credit but foreign withholding taxes can be deducted.
- OC means ordinary credit, i.e., credit for foreign withholding taxes (e.g., withholding taxes).
- IC means indirect credit, i.e., credit for underlying corporate taxes as well as foreign withholding taxes.
- ND means no credit and no deduction for any foreign withholding taxes incurred.